Xbox is planning a large layoff that will begin on Monday, July 6, affecting several of its studios, but a recent report indicates that Obsidian Entertainment is not slated for closure. According to a July 2 Bluesky post by Bloomberg reporter Jason Schreier, Obsidian is not in negotiations to avoid a shutdown, and the layoffs are expected to start with the developer of South of Midnight, Compulsion Games. An addendum to a July 2 Game Business article later clarified that Obsidian remains intact. Xbox says it will invest in its major franchises such as Gears of War and Halo while trimming smaller studios, many of which are currently negotiating to remain open. Obsidian, based in Irvine, California and founded in 2003, is known for role‑playing titles including Fallout: New Vegas, Pillars of Eternity, Alpha Protocol, and more recently Avowed and The Outer Worlds 2, which fell short of Microsoft’s sales expectations. Head Feargus Urquhart told Bloomberg that the underperformance was not a disaster but a learning opportunity, noting the six‑year development cycle and the need to reassess spending and timelines.